By Noel John and Pablo Sinha
(Reuters) -Gold prices rose nearly 2% on Wednesday, rebounding from a three-week low hit in the previous session as some traders covered short positions ahead of a pivotal Federal Reserve rate decision later in the day.
Spot gold was up 1.4% at $4,007.47 per ounce, as of 9:45 a.m. ET (1345 GMT), after dropping to its lowest since October 6 on Tuesday.
U.S. gold futures for December delivery gained 1% to $4,023.3 per ounce.
“Some of those speculative short positions are covering at this point in advance of the Fed’s decision …. The market will be paying close attention to the policy statement and (Fed Chair Jerome) Powell’s responses to questions today,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
The Fed is expected to cut interest rates by 25 basis points, responding to softer-than-expected September inflation data and signs of labor market weakness, despite limited economic data due to the ongoing U.S. government shutdown.
Investors will also closely watch Powell’s remarks for any signals on future policy.
Non-yielding gold typically thrives in a low-interest-rate environment and during times of economic uncertainty.
Meanwhile, U.S. President Donald Trump on Wednesday announced a trade deal with South Korea and expressed optimism about a similar truce with China’s Xi Jinping, ahead of talks scheduled Thursday.
A potential trade deal between the U.S. and China could diminish gold’s safe-haven appeal and weigh on prices.
Gold has gained 52% year-to-date, supported by geopolitical and economic uncertainties, U.S. interest rate-cut bets and sustained central bank buying. Prices hit a record high of $4,381.21 on October 20, but have fallen 8.5% since, in part due to easing trade tensions.
“The magnitude of the setback diminishes the likelihood of seeing $5,000/oz before the end of the year,” but gold prices could still reach that level by the first quarter of 2026, Grant said.
Elsewhere, spot silver gained 2.3% to $48.11 per ounce, platinum was up 1.5% at $1,608.95 and palladium rose 1.2% to $1,409.75.
(Reporting by Noel John and Pablo Sinha in Bengaluru. Editing by Mark Potter)
